Idaho budget deficit likely deeper

BOISE – Idaho’s budget deficit may be five times wider than Gov. Butch Otter announced earlier this month, leaving lawmakers with gut-wrenching decisions over whether to cut programs like public education or consider raising taxes.

House Assistant Majority Leader Scott Bedke on Thursday told the Associated Press the gap may reach $185 million, due to reduced tax revenue projections for this year and next. Less than a month ago, Otter based his proposed fiscal year 2012 spending plan on a deficit of just $35 million.

A dramatically larger deficit could have deep consequences for schools and Medicaid, especially if lawmakers don’t otherwise boost tax revenue. House Majority Leader Mike Moyle, R-Star, said the session just grew more difficult.

“I think you can (balance the budget without raising taxes), if you’ve got the willpower to do it,” Moyle told the AP. “People are going to have to get their arms around this, before they see just how serious this is.”

Otter’s budget chief, Wayne Hammon, declined to comment Thursday on how new developments will affect state finances.

Why the difference between the new figure and the one Otter announced during his State of the State speech Jan. 10?

First, it may cost state coffers as much as $70 million over two years to conform Idaho’s state tax code to new federal rules.

Lawmakers usually follow the federal rules to make it easier for residents and businesses to do their taxes, but they could opt out, potentially reducing the amount Idaho stands to give up.

And sales tax rebates for alternative energy projects, including big wind farms now going up across Idaho’s blustery southern plain, also could drain Idaho of nearly $50 million, split between 2011 and 2012.

What’s more, lawmakers aren’t convinced the state will collect $33 million in tax revenue above the current fiscal year forecast, something Otter built into his original 2012 budget. That’s after December, when tax revenue missed targets by $10 million.

Bedke, R-Oakley, said Otter’s original budget proposal responsibly reflected the economic reality in late 2010, when the Republican governor finalized his recommendations.

If the new $185 million deficit figure holds, lawmakers who were already struggling with how to cut $25 million from state Medicaid spending could be faced with the added prospect of targeting public education – or else opting to raise more tax revenue, hardly an easy solution in conservative, tax-leery Idaho.

“Everyone hits the wall at a different point when they’re running a marathon,” Bedke said.

A health coalition that’s pushing a bill to boost Idaho’s cigarette tax to $1.25 per pack, from 57 cents now, said it likely won’t introduce the measure until late February – for strategic reasons.

By then, lawmakers struggling with a dire budget situation might be more willing to go along with an increase to help fill what otherwise would be gaping holes in Medicaid.

The insurance program faces an estimated $83 million in annual costs from tobacco-related illnesses, so an extra $50 million from cigarette taxes could help ease the pain.

“As a coalition, we are concerned about the public health aspects we’ve talked about, including preventing youth from beginning smoking and encouraging cessation,” said Heidi Low, a lobbyist for the American Cancer Society Cancer Action Network. “In working toward that ultimate goal, we’re going to be as strategic as possible in moving good public policy forward.”